Aye to Renewable Act

But questions remain on how the FI tariff will be funded, says analyst

KUCHING: The Renewable Energy (RE) Act 2010, passed in the Dewan Rakyat on Monday, should become the catalyst towards developing renewable energy more aggressively in the country.

Under the bill, the government would offer competitive rates to buy power generated by individuals and companies in efforts to encourage them to invest more in renewable energy projects.

According to Chris Eng from OSK Research Sdn Bhd (OSK Research), the industry had expected it.

“It promotes the use of renewable energy and we did not expect any opposition to it,” said the head of research in an online note yesterday.

“The proposed Feed-In (FI) tariff should also be viewed as a good development. The scheme will see RE rates rise from the current 21 sen every kilowatt per hour (kWh) to between 23 sen and 123 sen per kWh, depending on the type of RE power generated. Under the tariff, Tenaga Nasional Bhd (TNB) will buy all RE generated and pay it to generators – making it much more lucrative to generate RE power.”

The nation’s Energy, Green Technology and Water Minister Datuk Seri Peter Chin announced that under the bill, the government proposed to implement the FI tariff system, deemed suitable for the country.

“We have studied similar mechanisms in other countries and made comparisons with the ones adopted in developed countries. And we feel that the feed-in tariff system is good and suitable for our country,” he said when winding-up debate on the bill in the Dewan Rakyat on Monday.

The ministry also mentioned the government’s aim towards having 2,080 megawatt (MW) in renewable energy capacity by 2020.

Nevertheless, Eng pointed out that the bigger question would remain on ways to fund the FI tariff.

“It is the area where we are more uncertain of – when the FiT will be implemented and how it will be funded?”

The original proposal was for electricity tariffs to be hiked by one per cent, which would cover the cost of the FI tariff. However, Eng outlined that since there was no announcement of an electricity tariff hike, the government would have to subsidise the cost to TNB, either directly via subsidies or via the RM1.5 billion Green Technology Fund should the tariff be implemented.

“We understand that in any case, implementation of the FI tariff will be ‘neutral’ to TNB.”

When asked on the impact on Sarawak – whose own development corridor was very much focused on renewable energy – Eng was quite unsure.

“We are not actually sure whether the act will apply to Sarawak, since the state is under its own energy and utility corporation: Syarikat Sesco Bhd, that is calling all the shots.

“As far as Sabah is concerned, there might be certain impact since it is also under TNB, just like in Peninsular Malaysia,” he replied in an e-mail.

Under the proposed FI tariff, first-movers – early applicants for an RE public-private partnership (PPA) with TNB – would have the most to gain as there would be a reduction in the tariff that they could secure from TNB.

“For example, for biogas RE, in the first year of FI tariff implementation, any biogas power plant that starts operation will enjoy 32 sen per kWh for its 16 years of operation. Any biogas plant that starts the following year will only enjoy 31.84 sen per kWh as the tariff will go down the later the plant begins operation.

“As such, the number of RE ‘wannabees’ has risen considerably from 24.7MW at the end of 2009 to the current 77.15MW of approved RE PPAs,” Eng painted the picture.

Based on the list of approved RE PPAs from TNB, it would appear that only KUB Malaysia Bhd, Berjaya Corporation Bhd and MMC Corp Bhd (MMC) were among the listed companies with approved RE projects, with Recycle Energy Sdn Bhd being a ‘waste-to-energy’ plant owned by MMC.

“We understand that Fitters Diversified Bhd has also plans to enter the RE power generation while Cypark Resources Bhd’s RE Park is already generating 100 kilowatt, although under the Economic Transformation Programme, the said RE Park is scheduled to expand capacity to 10MW.

Overall, the passing of the RE Act should benefit all these players once the FI tariff is implemented,” remarked Eng.

http://www.theborneopost.com/?p=115253